Dalmia Bharat - Near-Term Challenges To Continue: HDFC Securities

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HDFC Securities Institutional Equities

We maintain a BUY rating on Dalmia Bharat Ltd. with a lower target price of Rs 2,205/share (12 times its Sep-26E consolidated Ebitda). We hosted its management for non-deal roadshows in Mumbai.

The company is battling multiple challenges in the near term as it delivered lower than guided volume offtake in FY24 and also suffered on margins as it tried to regain some of the lost volumes. It is also disappointed that its near-certain acquisition of Jaiprakash Associates Ltd.’s assets (at least 5.4 million metric tonne cement capacity) has slipped away as the consortium of lenders pushed JPA to NCLT. This has practically killed Dalmia’s chance of acquiring the cement assets as JPA would be sold off en-bloc now.

Dalmia would also let go of the current tolling arrangement in the central region, as it would not be viable to service this market from its existing eastern plants. These have both lowered the company’s volume growth outlook and also derailed its target of 75 million metric tonne by FY27. However, not all is lost.

Dalmia continues to scale up its blended cement production and green energy consumption in its pursuit to further tighten its industry-leading operating cost structure and reduce its carbon footprint.

We lower our volume and margin estimates, factoring in the loss of the JPA deal and weak cement pricing in H1 FY25. While we estimate FY25E profitability to remain muted (4% YoY volume growth and flattish unit Ebitda YoY), we expect Dalmia’s volume and margin performance to recover from FY26E onwards.

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HDFC Securities Institutional Equities Dalmia Bharat Update.pdf

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